img

Ma Huateng

Tencent Holdings founder and CEO Ma Huateng shows that you don't need to reinvent the wheel to build an Internet empire, just a little innovation.

This month, the 42 year-old Ma Huateng officially became China’s richest man with a net worth of just over $13 billion, beating out beverage billionaire Zong Qinghou and property and entertainment mogul Wang Jianlin. Huateng owes his fortune to Tencent Holdings, which he founded back in 1998 as China’s response to AOL and still presides over today. Share prices have soared 92% over the past 12 months with the success of its mobile applications and its move into the hotly disputed e-commerce market. Tencent is now the fourth largest Internet company in the world behind American goliaths Google, Amazon and Ebay.

Relying on advertising revenues and a small number of premium users its first few years, Tencent has pioneered the sale of virtual goods for use in its online and mobile messaging services and games. While his holdings have also expanded to include a wide range of portals, e-commerce activities and social networking, the company remains synonymous with the messaging services it helped popularize in the country. Tencent’s QQ instant messaging has 818 million monthly active users and WeChat, its mobile messaging service, has surpassed 236 million active users.

Huateng has become a household name in his native China along with Tencent and the company’s hugely popular messaging services, but the shy CEO, who goes by the nickname “Pony,” rarely gives interviews. This reserved demeanor contrasts sharply with his aggressive counterparts in China’s tech industry such as Charles Zhang of Sohu.com Inc. or Alibaba Group’s Jack Ma. In business, however, Huateng has proven just as savvy as his more outspoken competitors.

Standing on the shoulders of giants

Like many in China’s tech industry, Huateng started by taking innovations coming out of the West and copying them. The billionaire does not shy away from admitting this, often paraphrasing a quote attributed to Issac Newton: “If I have seen further, it is by standing on the shoulders of giants.” But simply copying others can’t make you great. “The key is how to localize a great idea and create domestic innovation,” he told The China Daily in a 2009 interview.

In 1998, he found what he was looking for when he saw a presentation for ICQ, the world’s first Internet-wide instant messaging service developed by an Israeli company two years earlier. The service had already begun to take off in Western countries, but there was nothing on the Chinese market. Huateng and several of classmates from his days at Shenzhen University quickly developed their own similar software and released it under the name OICQ in February of the following year.

Their plan was to sell the software to China’s telecoms companies, who would then include the feature as part of their paging service. Huateng and his university friends had founded their own paging start up the year before, hoping to tap into the exponential growth of paging services in the country; in 1999, China’s beeper subscriber base reached 45 million. With few companies willing to pay a fair price for the software, however, Huateng and his associates made the bold decision to upload the software to the internet and allow users to download it for free. In just nine months, the instant messaging software had been downloaded by over one million users.

Innovating and diversifying

With the service quickly gaining a strong position in the Chinese market, the American Internet giant AOL, which had purchased ICQ in 1998, sued Tencent for violating intellectual property rights. Tencent lost the suit and was forced to launch the service under a new brand. In December 2010, Tencent released an updated version of the service, known as QQ. The rebranding did not seem to dissuade the country’s internet users and downloads of the software continued to soar. Despite the success of QQ, however, Huateng and his partners had trouble  piecing together a plan to monetize their popular service and the ballooning costs of servers and bandwidth were beginning to weigh heavily on the start-up.

“We knew our product had a future, but at that time we just couldn’t afford it,” he remembered. A $2.2 million investment by US investment firm IDC and Hong Kong based telecoms company Pacific Century CyberWorks gave Huateng the time he needed. Tencent quickly rolled out a service that enabled users to send messages directly to handsets, virtual goods such as emoticons and avatars, gaming, online advertisements and Tencent’s own payment system: QQ coin. By 2001, the company was back in the black and boasted over 500 million registered users.

Tencent has since led an aggressive strategy to diversify its holding. The company released its own portal website, QQ.com, entered the online game market in full force and is making inroads into the hotly contested e-commerce market with the launch of its C2C platform Paipai.com and the recent announcement that it had purchased a 10% stake in the logistics operator China South City Holdings Ltd. If the company is known for one thing in the Western press, however, it’s Tencent’s hugely successful mobile messaging service WeChat, known as Weixin in China.

As Web 2.0 giants like Facebook struggle to go mobile, Tencent has proven to be a pioneer in this fast growing market. While overall “app” usage jumped 115% in 2013, Messaging apps soared by a dramatic 203% over the same period, making it one of the most hotly contested markets. A new generation of tech-savvy youth are flocking to mobile messaging instead of social networks like Facebook, Google+ and Twitter, which offer less privacy. Many believe that these messaging apps will eventually become platforms in their own right and may even come to threaten the likes of Facebook.

page-separator

Comments are closed.